The central bank has announced that it is going to lower the rate of monetary growth from 12% per year to 5% per year. Most likely, this announcement will Select one: a. increase money demand, shifting the LM curve up and to the left. b. increase money demand, shifting the LM curve down and to the right. c. decrease money demand, shifting the LM curve up and to the left. d. decrease money demand, shifting the LM curve down and to the right.
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- Interest rate Central bankers in Widgetsa have decided that inflation is too high and contractionary monetary policy is needed. First, position LRAS where it would be if contractionary policy is needed. Then, show the short-run results of this policy action by shifting the appropriate curves on the graphs. Quantity of loanable funds Demand LRAS Supply Price level Select all of the actions that are contractionary policy choices the central bankers could use. increase taxes sell bonds to banks decrease government spending raise the interest rate for last-resort loans decrease reserve requirements Real GDP AD SRASI have to analyze, using the IS-LM model, the macroeconomiceffects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. The question is: Using the IS-LM model, show the effect of an increase in saving on production,investment and consumption, assuming that the Central Bank modifies the money supply when income changes, so that the LM curve is flat.Economics Suppose that the effects of COVID-19 on the economy can be thought of as a permanent negative productivity shock, i.e., a permanent decrease of the production owing to lower total factor productivity. What does the model predict will happen to the following variables: (1) real interest rate, (2) real output), (3) real consumption, (4) real investment, (5) labor input? For each variable explain why COVID-19 would have the predicted effect.
- 1. 1. Factors that shift the IS curve involve: A) interest rates and levels of GDP. B) the quantity of money and the demand for money. C) the trade balance. D) exogenous variables affecting demand, such as a change in government spending or a change in the exchange rate. 2. The LM curve shows that, with a fixed supply of money, as GDP rises, the demand for money will ____ and the rate of interest will ____. A) rise; rise B) fall; fall C) rise; fall D) fall; rise 3. If the supply of money increases, what happens in the IS–LM framework? A) The IS curve shifts right. B) The LM curve shifts right. C) The IS curve shifts left. D) The LM curve shifts left. 4. If the demand for money increases, what happens in the IS–LM framework? A) The IS curve shifts right. B) The LM curve shifts right. C) The…According to the IS-LM model, a. what happens to the interest rate, income, and investment when government spending decreases? b. how the Fed should adjust the money supply to keep income at its initial level. What happens to the interest rate as a result? c. If the Fed's goal is instead to hold the interest rate constant, explain in words how the Fed should adjust the money supply when government spending decreases. What happens to income as a result? d. What is the Fed's dilemma?Question Consider that the Ghanaian economy is a small and close, which is characterised by the following. AD=C+I+G+NX C=a+bY* Y*=disposal income T=T0 I=I0 G=G0 Md/P=Ld(Y,i) Ms=money supply ,which is given . AD=Aggregate demand ,C=consumption,G=Government expenditure ,T=Tax,P= Pricelevel,I=Investment,NX=Netexports (a) Consider an increase in Government spending ∆ > .Assume for now that both price and expected price are fixed. Also assume that government does not implement any other policy than the increase in Government spending. What is the effect of this policy on the goods market? (b) What is the effect on equilibrium in the money market? Present your answer in swells labelled diagram, showing both money supply and demand before the policy was implemented, and that after the policy was implemented in the same graph. (c) Solve for equilibrium in the goods market. d) Suppose the policy change is rather a increase in real money supply not a decrease in government spending.What…
- 1. Find the value of autonomous spending. 2. What is the slope of the LM curve? 3. Find the value of the real money supply. 4. Show the goods market equilibrium. 5. Show the money market equilibrium. C = 1500+ 0.40*(Y-T) I = 600-60*i G = 200 T = 2000 M = 2100 P = 5 L = 0.75Y-25*iConsider a closed economy where the goods and money markets are described by the following relationships: C = 200 + 0.9(Y – T) 1 = 400 – 15r M = 200 + Y – 100r G = 150 T = 100 M = 2000 P = 2 Where Cis planned consumption, / is planned investment spending, Tis government tax revenues, G is government purchases, M is the money supply, P is the price level and r is the interest rate. Department of Economics a) Derive the two expressions for the IS and LM equilibrium relationships respectively. Sketch a graph of the two relationships. b) Calculate the equilibrium value of output Y and interest rate r (round off your answers to one decimal point). Compute also the level of consumption and investment spending in equilibrium and check whether the actual level of spending matches the equilibrium level of output.The U.S. economy has the long-run aggregate supply curve Ÿ" = Ã+K +H where His the growth rate of human capital (the other terms are defined as usual). In the questions below, you can type YL for , YD for y, YS for yS, Y for y, and P for p. 1. Initially, A = 1, and H = K = 0. Assume also that initially the rate of money growth is 3 and the velocity of money is not changing. • a) Write down the aggregate demand curve: b) Write down the long-run aggregate supply curve: • c) In the long-run equilibrium. the rate of inflation is the rate of GDP growth is d) Write down the short-run aggregate supply curve: 2. The arrival of the novel coronavirus in the U.S. causes human capital to persistently decline as people fall ill. F falls to -4. Assume all other parameters (A, m etc.) remain unchanged. a) By the time the economy reaches the new long-run equilibrium, which curves have changed? b) In the new long-run equilibrium.. o the rate of inflation is the rate of GDP growth is c) Write down the…
- If foreign wealth-holders decide that the United States is the safest place to invest their savings, what would the effect be on the economy here? Show graphically using the AD/AS model.4w=180 b=0.75 g=90 tax=90 nx=-50 i=300-10r central bank reserves are gold=100 f. currencies 200 l.currencies 150 t-bills 500 rrr=0.2 md=5000-50r calculate the equilibrium gdp (y). if ypot=1700 by how much should the central bank change the rrr to attain potential if instead the central bank will involves open market operations in order to attain potential. by how much should it increase or decrease t-billsThere are . interest rates in the IS-LM model without the rest of the world. Select one: A. two B. three C. one D. zero